Might as well get involved in this thread..have just arrived home from a job in Bass Strait where we drilled a well out to 60 degrees from vertical and steered same to the final target.
In the oil business we carry out our directional drilling by turning the drill bit with a mud powered downhole motor (rather than turning the whole drill string and bit as one). The motor has an adjustable bend in it (1-2 deg usually) and by orientating the motor we can steer the drill bit in the desired direction. Directional control is provided by an MWD (measurement while drilling) tool located behind the motor. The MWD has a magnetometer and gravimeter on board and the readings from same are sent back to surface in real time by way of a pulser on the tool. The pulser sets up a pulse in the drilling mud in the drill string and a pressure sensor at surface converts the mud pulse back into an eletcrical pulse....easy.